Gold slightly falls on firmer dollar, investors await ECB outcome

Gold prices on Thursday eased as the U.S. dollar hovered near multi-week highs, while some investors locked in profits ahead of European and U.S. central bank meetings this month.

The European Central Bank (ECB) is meeting later in the day, followed by the U.S. Federal Reserve next Tuesday-Wednesday.

Spot gold went down 0.2 percent at $1,422.80 per ounce, as of 0303 GMT. U.S. gold futures were down 0.1 percent at $1,422.90.

“From last three days, gold prices have been range-bound. Some money managers are starting to shut some positions to prepare for the Fed meeting, and also the ECB decision coming out today,” said Benjamin Lu, analyst, Phillip Futures.

“Before the key events happen, people like to take in some profits because nobody knows what is going to happen. Some might capitalize on volatility to push prices slightly lower and buy back after the dip. Overall, on the long-term we are still bullish on gold,” Lu added.

Weighing down gold prices, the U.S. dollar edged near a two-month high against a basket of major currencies on Thursday. A stronger dollar makes gold costlier for holders of other currencies.

Investor focus shifted to the ECB meeting due later in the day and a widely expected interest rate cut from the Fed next week, which are expected to dictate the tempo for currencies and bond yields in coming months.

Lower U.S. interest rates put pressure on the dollar and bond yields, increasing the appeal of non-yielding bullion.

Further boosting hopes of lower interest rates, a series of purchasing manager index (PMI) readings in the United States and Europe on Wednesday came in weaker than expected.

In the United States, data showed manufacturing activity slowed to a 10-year low in early July with production volumes and purchases falling.

Gold prices have climbed more than 12 percent or $150, since touching its 2019 low of $1,265.85 in early May, driven by dovish outlook from major central banks, signs of the U.S. economy losing steam and an escalation in tensions in the Middle East.

“The gold rally will be vulnerable to the rhetoric of central banks, as their actions have for the most part been priced into the asset,” Alfonso Esparza, a senior market analyst at OANDA, said in a note.

Meanwhile, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, dropped 0.11 percent to 822.25 tonnes on Wednesday from Tuesday.

Spot gold remains neutral in a narrow range of $1,412-$1,427 per ounce, according to Reuters technical analyst Wang Tao.

Silver dropped 0.6 percent to $16.49 per ounce, after hitting over a one-year high of $16.64 in the previous session.

Platinum rose 0.3 percent to $878.21 an ounce, its highest since May 7, while palladium edged up 0.1 percent to $1,541.07, after touching a one-week high earlier in the session.

Source: Reuters